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Evaluation of Income Stability Tools - AgriStability and AgriInvest

Note: Some of the content is wider than usual.

Report - Office of Audit and Evaluation
June 2012

The AAFC Evaluation Committee recommended this evaluation report for approval by the Deputy Minister on June 6, 2012.


Executive Summary

This evaluation examines the relevance and performance of Agriculture and Agri-Food Canada's (AAFC) Income Stability Tools - AgriStability and AgriInvest. These programs are offered under the Business Risk Management (BRM) suite of programs as part of AAFC's national agricultural policy framework, Growing Forward.

The evaluation was conducted by the Office of Audit and Evaluation (OAE) in accordance with the Treasury Board Policy, Directives and Standards on Evaluation (2009). The results are intended to inform planning for the next phase of policy and program development.

Background and Profile

The BRM suite is designed to support Growing Forward strategic outcomes by providing producers with effective tools to manage business risks that are largely beyond their control, thereby helping them to reduce income losses.

Within the BRM suite, AgriStability and AgriInvest are intended to help producers to stabilize their farm income. AgriStability is a margin-based program that covers declines in a producer's farm income relative to previous years. AgriInvest is a self-managed savings account into which a producer deposits funds and receives matching government contributions. AgriStability and AgriInvest are delivered through a mix of federal and provincial/territorial administrations.

Government contributions and costs to administer AgriStability and AgriInvest are shared between the federal government and the provinces and Yukon Territory on a 60:40 basis. As the programs are demand-driven, program expenditures fluctuate from year to year. Since the programs' implementation, federal expenditures have totalled $1.3 billion for AgriStability and $1.3 billion for AgriInvest (including the AgriInvest Kickstart Initiative).

Methodology

The evaluation gathered quantitative and qualitative data using the following lines of evidence: a document and literature review (including AAFC studies/papers prepared for the FPT BRM Policy ADMs Working Group in support of Growing Forward 2); analysis of a BRM survey previously undertaken by AAFC in 2010; a review of program performance and financial data; statistical analysis and modeling; interviews with internal and external stakeholders; focus groups with producers, accountants and financial representatives; and case studies of program participants.

Key Findings

Government support for the agricultural sector has been important in helping producers manage business risk and income variability. Income variability affects producer well-being and investment decisions, and production levels will normally decrease as risk and uncertainty increase. Producers view government BRM programs as important in addressing the gaps in available private sector BRM tools.

AgriStability and AgriInvest conceptually are aligned with federal roles and departmental strategic outcomes. Programs within the BRM suite are designed to work in a complementary manner and there is no duplication of payments to producers.

AgriStability and AgriInvest are generally performing well in terms of coverage and participation. Furthermore, AgriStability payments provide effective stabilization of producer margins over the medium-term.

The evaluation identifies several areas requiring attention:

Recommendations

The evaluation report identifies the following seven recommendations:

Recommendation #1:

AAFC should work with the provinces and territories to:

Recommendation #2:

The Strategic Policy Branch should:

Recommendation #3:

AAFC should work with the provinces and territories to:

Recommendation #4:

AAFC should work with the provinces and territories to:

Recommendation #5:

AAFC should work with the provinces and territories to:

Recommendation #6:

AAFC should work with the provinces and territories to:

Recommendation #7:

The Farm Financial Programs Branch should:

List of Acronyms

AAFC
Agriculture and Agri-Food Canada
ADM
Assistant Deputy Minister
ANS
Allowable Net Sales
APF
Agricultural Policy Framework
APP
Advance Payments Program
BRM
Business Risk Management
BSE
Bovine spongiform encephalopathy
CADMS
Canadian Agriculture Dynamic Micro-Simulation Model
CAIS
Canadian Agricultural Income Stabilization
CCB
Communications and Consultations Branch
CRA
Canada Revenue Agency
EBP
Employee Benefit Plan
EU
European Union
FIPA
Farm Income Protection Act
FIPD
Farm Income Programs Directorate
FFPB
Farm Financial Programs Branch
FFS
Farm Financial Survey
FPT
Federal-Provincial-Territorial
FTE
Full Time Equivalent
G&C
Grant and Contribution
MRAP
Management Response and Action Plan
NISA
Net Income Stabilization Account
NPAC
National Program Advisory Committee
NPO
Non-Pay Operating
OAE
Office of Audit and Evaluation
OAG
Office of the Auditor General
OECD
Organisation for Economic Co-operation and Development
PAA
Program Activity Architecture
PPP
Price Pooling Program
RAD
Research and Analysis Directorate
SPB
Strategic Policy Branch
TAP
Targeted Advance Payment

1.0 Introduction

The Office of Audit and Evaluation (OAE) of Agriculture and Agri-Food Canada (AAFC) conducted an evaluation of AgriStability and AgriInvest. These programs are offered under the Business Risk Management (BRM) suite of programs as part of AAFC's national agricultural policy framework, Growing Forward. This evaluation was a requirement under AAFC's Five-Year Departmental Evaluation Plan. Given the complexity of income stability programs, the evaluation was launched in the fall of 2010 after receiving approval of its Terms of Reference by AAFC's Departmental Evaluation Committee (DEC). Income stability programs are funded on a 60:40 (Federal:Provincial) basis. As a result, the Provinces and Territories were updated on the status of the evaluation throughout the project. With Growing Forward expiring at the end of 2012/13, the evaluation will help to inform planning for the next phase of policy and program development.

During 2011, updates were provided to the FPT Policy ADMs and the FPT BRM Working Group on the status of the evaluation. Various provinces provided assistance in the conduct of the evaluation by providing information and DEC received updates on the findings.

As AgriStability and AgriInvest are both designed as income stability tools, the two programs were evaluated together. Other BRM programs are subject to separate evaluations:

1.1 Evaluation Scope

As per the Treasury Board Directive on the Evaluation Function, the evaluation examined the programs' relevance and performance. Specifically, the evaluation examined: continued need for the programs; alignment with government priorities, departmental strategic outcomes, and federal roles and responsibilities; achievement of intended outcomes; and the extent to which the programs demonstrate efficiency and economy.

The evaluation was national in scope, covering the period from the programs' implementation in 2007/08 to 2011/12.

1.2 Evaluation Approach

The evaluation was completed by OAE based on research and analysis conducted by PRA Inc. (an independent consulting firm) and AAFC's Research and Analysis Directorate (RAD). Employing a summative non-experimental design and incorporating both primary and secondary data, the evaluation used multiple lines of evidence to address the evaluation issues and questions.

The evaluation was conducted with the advice and feedback of a BRM Evaluation Working Group. This intradepartmental working group is comprised of representatives from OAE, Farm Financial Programs Branch (FFPB), Strategic Policy Branch (SPB), Communications and Consultations Branch (CCB), as well as external experts on agricultural policy.

1.3 Methodology

The evaluation included several lines of evidence.

1.4 Methodological Considerations

There are several considerations or limitations to note when reading the evaluation:

2.0 Profile Of The Programs

2.1 Background

Growing Forward is the current federal-provincial-territorial (FPT) agricultural policy framework for the 2008/09 to 2012/13 period. Under Growing Forward, governments agreed to work together to achieve three strategic outcomes:

The BRM suite is intended to support Growing Forward strategic outcomes by providing producers with effective tools to manage business risks that are largely beyond their control, thereby helping them to reduce income losses stemming from low commodity prices, or reduced production caused by natural disasters or market conditions.

Growing Forward includes four core BRM programs:

Other BRM programs outside the core suite include loan guarantees under the Canadian Agricultural Loans Act, the Advance Payment Program (APP) delivered under the authority of the Agricultural Marketing Programs Act and supply-management for a number of commodities (e.g. dairy, poultry and eggs).

Together, AgriInvest and AgriStability were designed to replace the Canadian Agricultural Income Stabilization (CAIS) program, which operated from 2003/04 to 2006/07 under the predecessor to Growing Forward, the Agricultural Policy Framework (APF).

CAIS was intended to stabilize farming income in response to both small and large declines in income. CAIS was based on the concept of a whole-farm production margin, and payments were calculated based on the difference between the current-year production margin and the average production margin for the recent historical period.

Stakeholders identified several concerns with CAIS throughout the life of the program:

At the end of the APF, AgriStability was implemented in 2007 to replace CAIS and to address these concerns. (A list of major design changes from CAIS to AgriStability can be found in Annex A.) AgriInvest was also implemented at this time to complement AgriStability and address small financial losses to meet the needs of the sector. By providing producers with greater flexibility and responsibility in managing their savings accounts to mitigate business risks and income declines, it was expected that AgriInvest would enhance the predictability and timeliness of BRM programs.

As part of the GF2 consultations, stakeholders have expressed ongoing concerns regarding the lack of transparency in the calculations of program payments; as well as the predictability, timeliness and bankability of the program.

AgriStability and AgriInvest are governed by the provisions of section 4(1) of the Farm Income Protection Act (FIPA), which authorizes the Minister to establish programming with the provinces to stabilize net income.

2.2 Design and Delivery - Agristability

AgriStability is a margin-based program that provides support when producers experience farm income losses. Payments are issued when an eligible producer's program margin falls below 85% of their reference margin.

A program margin is defined as a producer's allowable income minus allowable expenses in a given year, with adjustments for changes in receivables, payables and inventory. The reference margin is calculated from the producer's margins by averaging over the five preceding fiscal years after eliminating the highest and lowest values from the calculation (i.e., taking the "Olympic" average).

Support from AgriStability is calculated based on different levels of program margin decline:

The maximum AgriStability payment for a producer is the lesser of $3 million or 66.5% of the margin decline in Tiers 2 and 3 in the program year margin.

An AgriInvest/AgriStability Harmonized Form for each program year is available from Canada Revenue Agency (CRA) near the end of the calendar year. Farmers have until September to submit their form for the previous year to avoid late filing penalty (except in Ontario where the deadline is June). Eligible producers pay an annual fee to participate in the program, which is based on the value of a producer's protected reference margin.

Additional details on AgriStability's design and delivery can be found in Annex B.

Interim Payments and Targeted Advance Payments

An interim payment option allows eligible producers to access a portion of their AgriStability payments earlier than would otherwise be the case. Interim payments are made based on the participant's projected AgriStability payment, as calculated at the time of the interim. Interim payments are normally issued at a rate not greater than 50% of the total estimated AgriStability payment.

Targeted Advanced Payments (TAPs) are similar to interim payments, but are used only in circumstances of unusual events affecting specific groups of producers. If agreed to between the federal government and a province or territory, a TAP may be established for participants in a designated sector or region in cases where production or market disruption has a significant negative impact.

2.3 Design and Delivery - AgriInvest

AgriInvest is a self-managed savings account for producers, supported by government, which provides coverage for small income declines and support for investments to mitigate risks or improve market income. AgriInvest is intended to be a first-line support mechanism within the BRM program suite when producers face declines in Tier 1.

Producers deposit money into an AgriInvest account and receive matching government contributions. Producers can deposit up to 1.5% of their Allowable Net Sales (ANS) Footnote 1, which cannot exceed $1.5 million per participant (i.e., the maximum government contribution in any given year is $22,500 per producer). Accounts have maximum balance limits of 25% of a participant's ANS for the current and preceding two years. Producers can withdraw funds from their account at any time.

While initially held by the federal government, starting with the 2009 program year AgriInvest accounts have been held by financial institutions in all provinces except Quebec. Once deposits are made by producers, financial institutions notify AAFC, and matching contributions are credited to the producer account. In Quebec, the program is delivered by La Financière agricole du Québec.

Additional details on AgriInvest's design and delivery can be found in Annex B.

2.4 Program Resources

As part of Growing Forward, government contributions and costs to administer the AgriStability and AgriInvest programs are cost-shared between the federal government and the provinces and Yukon territory on a 60:40 basis.

Table 1 presents the AAFC expenditures for AgriStability for the fiscal years of 2008/09 to 2010/11. AAFC costs totaled $1.3 billion, which included both Vote 1 costs of $91 million and Grants and Contribution costs of $1.2 billion. Vote 1 costs included AAFC's net expenditure to deliver, and to support the delivery of provincial delivery agents. The Grants and Contribution costs included AAFC's contribution to both program payments and administrative costs for provincial delivery agents.

Table 1: AAFC AgriStability expenditures for 2008/09 to 2010/11 ($ millions)
  2008/09 2009/10 2010/11
Source: AAFC
Vote 1 (Salary, Non-pay Operating (NPO)
and Employee Benefit Plan (EBP))
42.3 28.8 20.0
G&Cs 340.5 524.7 371.5
Total 382.8 553.5 391.5

Table 2 presents AAFC expenditures for AgriInvest for 2007/08 to 2010/11. Vote 1 costs totaled $25 million, while Grants and Contributions totaled $698 million during the period.

The federal government implemented a one-time AgriInvest Kickstart Initiative, which provided seed funding to AgriInvest accounts totalling $560.2 million.

Table 2a: AAFC AgriInvest expenditures for 2007/08 to 2010/11 ($ millions) : AgriInvest
  2007/08 2008/09 2009/10 2010/11
Source: AAFC
Vote 1 (Salary, NPO, EBP) 1.5 4.5 6.8 12.2
Statutory G&Cs 167.3 193.4 140.3 196.6
Total 168.8 197.9 147.1 208.8


Table 2b: AAFC AgriInvest expenditures for 2007/08 to 2010/11 ($ millions) : AgriInvest Kickstart
  2007/08 2008/09 2009/10 2010/11
Source: AAFC
* negative amounts for AgriInvest Kickstart reflect overpayment recoveries and/or write downs of funds previously committed.
Operating 4.5 n/a n/a n/a
G&C 580.1 (9.1)* (12.5)* (2.8)*
Total 584.6 (9.1)* (12.5)* (2.8)*


Table 2c: AAFC AgriInvest expenditures for 2007/08 to 2010/11 ($ millions) : Totals
  2007/08 2008/09 2009/10 2010/11
Source: AAFC
Total for AgriInvest and AgriInvest Kickstart 753.4 188.8 134.6 206

As both AgriStability and AgriInvest are demand-driven programs, expenditures cannot be precisely forecasted and fluctuate from year to year. As a result, the approval of BRM program funding includes a provision to allow an additional 10% of the program target expenditure to be spent without seeking further authority. This 10% flexibility is referred to as the "funding sleeve". Should the anticipated or actual expenditure exceed the target by more than the "funding sleeve", the Minister is required to seek further authorities to negotiate program adjustments to subsequent years. AAFC is required to report to Cabinet on the BRM anticipated and actual spending against the funding target every year.

Table 3 shows the number of AAFC staff involved in delivering each program, in full time equivalents (FTEs). As shown, there was a significant decrease in AAFC AgriStability staff numbers between 2009/10 and 2010/11, which reflected the period of transition of AgriStability delivery to the provinces for British Columbia and Saskatchewan.

Table 3: AgriStability and AgriInvest, AAFC full time equivalents (FTEs), for where Canada delivers, 2008/09 to 2010/11
  AgriStability FTEs AgriInvest FTEs
Source: AAFC
2008/09 590.0 43.3
2009/10 466.4 150.2
2010/11 268.7 152.4

2.5 Governance

The governance structure for all BRM programs includes the FPT BRM Policy Working Group and the FPT Administrators Working Group, both co-chaired by AAFC and a provincial representative. There is also the National Program Advisory Committee (NPAC), which includes FPT and industry representatives. These three groups examine BRM policy and program issues and, as requested, develop options to be brought forward to senior management, including FPT Assistant Deputy Ministers (ADMs), Deputy Ministers and Ministers. NPAC provides advice through FPT ADMs. The FPT Working Groups are responsible for program administrative and policy issues.

FFPB provides overall program management and coordination, and ensures due diligence. Within FFPB, FIPD is responsible for preparing national guidelines, and for developing program applications, handbooks and other materials. FIPD reports on program results, service standards and financial information, and monitors program risks where Canada delivers (Newfoundland, New Brunswick, Nova Scotia and Manitoba).

AgriStability was first delivered by provincial governments in Alberta, Ontario, Quebec and Prince Edward Island and by AAFC (FIPD) in all other provinces. Saskatchewan and British Columbia assumed responsibility for administering AgriStability to their producers beginning with the 2009 program year. The Program's devolution began at the request of the provinces who wished to deliver AgriStability in conjunction with AgriInsurance to obtain operational efficiencies.

Responsibilities of federal and provincial/territorial administrators in their respective areas of delivery include:

For the AgriInvest program, overall management and coordination is undertaken by FFPB for all provinces except Quebec. Program administration is undertaken within FFPB by FIPD, which is responsible for the following AgriInvest activities:

In Quebec, La Financière agricole du Québec administers the program and manages producer accounts directly (i.e., accounts are not held at financial institutions as is the case in the rest of Canada).

3.0 Evaluation Findings

3.1 Relevance

3.1.1 Government support for the agricultural sector has been important in helping producers manage business risk and income variability.

This section discusses the continued need for BRM programs given the risks and income variability faced by producers, and the impact of this income variability on producer production levels and stability in the agricultural sector.

Risks in Agriculture

The agriculture sector faces a wide range of risks from a variety of sources Footnote 2. Production risks include unfavourable weather conditions, such as drought, unseasonably cold or hot weather, and heavy moisture. All of these can prevent planting, negatively impact farm yields and the quality of crops, and delay harvest. Production can also be affected by crop pests and diseases.

Market risks are related to both inputs and outputs. Farmers face fluctuating fuel, fertilizer and feed costs. Prices for crops are determined in large part by global commodity markets and are outside producers' control. The export-orientation of much of the sector also places farmers at risk from the variability of transportation costs and exchange rates, as well as from tariff and non-tariff barriers. Competition from international markets and changing consumer preferences are further risks.

The Alberta beef case study producer noted that the main risks to his farm income were livestock prices, input costs, and weather.

The producer said: "The calf price is so much lower than the input costs compared to 30 years ago. Back then, we got $1.25 per pound for calves and were paying 25 cents per gallon for fuel. Now, the calf price is the same but the fuel is $5 a gallon."

Other risks for farmers include the business risks related to the management of revenue and cash flow to pay bills, labour employment, and interest rates. Farmers also face the risks associated with changing government policies and programs, tax rates, and the impacts of international trade agreements.

In 2010, producers identified market risks as having the most significant financial impact on their farm business Footnote 3.

Interviewed stakeholders believe that the types of risks facing producers have not changed since AgriStability and AgriInvest were first implemented in 2007. Some noted that the severity of certain risks could increase in the future, due to the impacts of climate change on weather and pests, increased globalization resulting in competition from emerging economies, and other factors.

Income Variability

As a result of this wide range of risks, farm businesses can face significant income variability. Evidence shows that some farm types have experienced more income variation than others. As shown in Table 4, the variability of producer margins for cattle farms and for hog farms was much higher than for farms in the grains and oilseeds, and fruits and vegetables sectors.

Table 4: Average producer margins and standard deviations, across commodities, 2006 ($/unit of production)
Commodity Average Standard deviation
Source: AAFC
Cattle 44,794 262,994
Supply Managed 205,505 347,787
Fruits & Vegetable 164,236 472,429
Hogs 236,414 1,096,371
Grains & Oilseeds 87,827 193,156
Other 151,062 993,236

On an aggregate level, the agriculture sector's net cash income demonstrated increasing variability in the period examined in a 2009 AAFC report Footnote 4. Figure 1 shows the aggregate net cash income from 1990 to 2008. The sharp decline in income between 2002 and 2003 was mainly due to drought in the Prairies and the impacts of BSE. Rising grain and oilseed prices in 2007 and 2008 led to an increase in net cash income for those years.

Description of this image follows.
Description - Figure 1

Aggregate Net Cash Income, Canada, 1990 to 2008 (2006$)

Fluctuations of the Net Cash Income for Canadian farms between the years 1990 to 2008. The 2007 and 2008 numbers are forecasted estimates.

Liner net cash Income starts at $7 Billion in 1990 and drops to about $6.8 Billion in 2008.

Net cash income fluctuates slightly, less than one billion below and above $7 Billion in most years. The exception years being 2001 ($9.2 B), 2002 ($8.8 B); 2003 ($5.2 B); and 2006 ($5.3 B).

Source: Statistics Canada, Value Added Account.
Note: 1990 to 2006 are in constant 2006$.
"f" denotes that 2007 and 2008 numbers are based on AAFC forecasted estimates.

Some regions in Canada had experienced much more income variation than others. The AAFC report noted large variability in year-over-year real net income in the Atlantic provinces, with less variability in Western Canada and relatively stable income in Ontario and Quebec Footnote 5.

The diversity of the agricultural sector means that the income variability in one sub-sector can offset gains and losses in another. Partly this is because agricultural sub-sectors are subject to different stresses and because price advance in one sub-sector can affect net incomes in another. For example, increased grain prices have a positive impact on revenues for grains and oilseeds producers but a negative impact for livestock producers who will need to pay more for feed.

Impact of Income Variability on Farm Businesses

The literature demonstrates that income variability is an important challenge for the agricultural sector due to its potential impact on producers' well-being, and production and investment decisions.

The negative effects of risk and uncertainty explain why insurance markets develop in the first place—many people willingly pay regular premiums to protect themselves from the small risk of incurring large losses, fully realizing that the event that triggers payment from the latter may never occur Footnote 6. A risk-averse individual's well-being is expected to be higher when he or she has opportunities to lower the premiums (in effect sharing his or her risk with others). Conversely, his or her well-being is lower when no such opportunities exist Footnote 7.

The literature has argued that risk-averse businesses will also generally reduce investments during business downturns and then accelerate spending on capital during the upturn. Economic theory and practice has shown this is sub-optimal for business in general, lowering long-term production and profitability. In other words, production levels will normally decrease as risk increases Footnote 8. In some cases, highly risk-averse producers may actually increase supply to avoid catastrophic outcomes Footnote 9, but stock-piling as a form of self-insurance can be costly and can have negative consequences for a producer if prices fall resulting in a lower value of inventory.

Additionally, the OECD points out that without private instruments for managing risks (both self-insurance and third-party insurance) and government intervention, risk and uncertainty may result in lower than profit-maximising levels of production Footnote 10. In other words, market failure may lead to outputs below a socially optimal level. The importance of private sector instruments cannot be understated. They provide producers with a number of customized options for managing business risks. For example, single price forward contracts to average price contracts provide farmers with a range of price protection depending upon when they choose to sell their products. Together, private and public instruments provide producers with a full range of business risk management tools to address market failures.

Rationale for Whole Farm Approach

BRM programs have been evolving since the 1940's. In the early period, programming focussed on commodity specific price support. If the price of a commodity fell below a predetermined support price, payments were made to compensate for the decline regardless of the potential positive effects on income of increased production of the commodity or prices in other commodities. By the 1990's, Governments were experiencing significant challenges with this approach. It was costly, not administratively feasible for all commodities, distorted producer's production decisions and resulted in payments being capitalized into assets. In addition, commodity specific payments were extremely vulnerable to countervail action.

In the 1990's, the direction shifted toward more whole farm approaches involving savings accounts and margin based programs. These programs focused on assisting producers in managing risk at the farm level rather than on a commodity by commodity basis. The whole farm approach of these programs neutralized the impacts on producers' production decisions, allowed for the participation of all commodities and reduced the risk of countervail.

While there is a strong policy rationale for operating subsidized programs on a whole farm basis, producers managing diversified operations often argue that they are not treated equitably under the AgriStability program due to the diversification in their operations which limits margin volatility and therefore program payments. They further suggest that AgriStability provides a competitive advantage to their monoculture neighbours when competing for land resources, by ensuring viability during downturns and allowing for full realization of profits during the peak price periods. Other programs, like AgriInvest, while still whole farm, is not as contentious as the margin based programming that provides compensation based on income volatility.

Rationale for Government Support for BRM Programs

A key rationale for government BRM programs is that the tools available to producers through the private sector (again, self-insurance and third-party opportunities) are not sufficient on their own to help producers to manage business risks and income variability. Private tools and approaches for business risk mitigation available to producers include:

The province of Alberta has recently introduced Livestock Price Insurance for cattle and hogs as a simplified means to protect against unexpected price declines within the production cycle (with no cost sharing of premiums by the Alberta government). Livestock price insurance is expected to offer timely and predictable payments in the event of an unexpected price decline but is not intended to offer a profit guarantee. Currently, the program is in its infancy and participation is low.

Producers in focus groups noted that there was a need for government programs to complement other available business risk management tools. Stakeholders noted that the private sector's role in providing business risk management tools will naturally be dictated by considerations of profitability, which will lead to gaps in assistance. As a result, there is a need for government to play a complementary role.

In conclusion, government support has been important in helping producers to manage the considerable risk and income variability they face. Government BRM tools have complemented other available producer-led and private sector options to provide stability in the sector in order to maintain production levels.

3.1.2 AgriStability and AgriInvest are aligned with the historic federal role of supporting the agricultural sector, and with the Growing Forward policy framework and AAFC strategic outcomes.

The evaluation assessed the alignment of the programs with federal roles, responsibilities and priorities, and with AAFC strategic outcomes.

Alignment with Federal Roles and Responsibilities

There is a long history of federal involvement in assisting with business risk management. Federal support has evolved since Confederation, when agricultural policy was closely linked with immigration policy to ensure a sufficient labour pool for Canada's growing agricultural sector. More recently, federal support to agriculture has concentrated on support for farm families and affording some degree of protection against international corporate power and competitive threats. Over the last two decades, agricultural policy has increasingly aimed at fostering the competitiveness of the sector.

At the same time, Canada's agricultural policy instruments and programs have also evolved. From the 1940's to the 1980's, programs tended to focus on commodity-specific supports. During the 1980's, the Canadian government responded to significant farm price and revenue instability through the active use of emergency ad hoc payments to help farmers manage deficits. Starting in the 1990's, programming shifted from "safety net" programs that were commodity-specific, to programs that emphasized business risk management and a "whole-farm" approach, which are consistent with trade agreements that limit subsidies.

Federal policies directed specifically at farm income stabilization in Canada date back to the introduction of the Agriculture Stabilization Act in 1958. Since that time, there has always been at least one national program aimed at stabilizing farm income.

Stakeholders widely believe that while producers have the ultimate responsibility for managing their business risks, the federal government also has important roles and responsibilities. These include:

It was also recognized that government BRM programs are designed to treat farmers equitably regardless of region, size or farm type.

Alignment with the Growing Forward Policy Framework and AAFC Strategic Outcomes

AAFC has signalled the importance of business risk management and income stabilization within the Growing Forward policy framework. The BRM programs contribute to Growing Forward's strategic outcome of "a sector that is proactive in managing risk". Key policy outcomes under Growing Forward include greater stability of producers' incomes, and BRM programs that are "timely, responsive and predictable" Footnote 12.

AgriStability and AgriInvest are also aligned with departmental strategic outcomes in AAFC's Program Activity Architecture (PAA), though this alignment has changed since the programs were first introduced. The current (2009/10) PAA links BRM programs to the strategic outcome of "a competitive agriculture, agri-food and agri-based products sector that proactively manages risk". Previously, AgriStability and AgriInvest were linked to AAFC's strategic outcome of "security of the food system" in the department's 2006/07 PAA.

The successor to Growing Forward is currently being developed by AAFC and provincial/territorial governments. While its outcomes have yet to be finalized, the Saint Andrews Statement, an early statement that laid out the essential elements that Ministers will look for in the next policy framework, noted the continued importance of effective business risk management in supporting the adaptability and sustainability of the agricultural sector Footnote 13.

The programs are aligned with the department's legislated mandate. AgriStability and AgriInvest are statutory programs governed by the provisions of section 4(1) of FIPA. Section 4(1) authorizes the Minister to enter into agreement with one or more provinces for the establishment of programming for, among other purposes, income stabilization.

Some of the wording in FIPA is, however, outdated. FIPA states that BRM programs should encourage the long-term social and economic sustainability of farm families and communities. While support for rural communities and farm families may be a positive unintended impact of the programs, it is not a stated program objective. Furthermore, FIPA's wording makes reference to previous BRM programs, such as the Net Income Stabilization Account (NISA). When FIPA is next reviewed the wording should be updated to reflect the current BRM suite and its objectives.

In conclusion, AgriStability and AgriInvest are aligned with historic federal roles, the Growing Forward policy framework, and AAFC strategic outcomes.

3.1.3 BRM programs are designed to work in a complementary manner.

The evaluation examined how the programs of the BRM suite interact, as well as the potential for duplication of payments.

Complementarity of BRM Programs

BRM programs are designed to work in complementary ways, reflecting the different triggers and timing of program funding. Specifically:

Description of this image follows.
Description - Figure 2

BRM Program Mapping
Business Risk Management (BRM) Delivery Process for 2009 Program Year

This figure illustrates the delivery process for the individual BRM programs after the event of an income loss. An income loss is assumed to occur anytime throughout the year in 2009 and the various programs response to this loss in the following descriptions.

The BRM programs include AgriStablity, AgriInvest, AgriInsurance, AgriRecovery, Advanced Payments Program and Price Pooling Program.

AgriStability makes interim payments in between Septmber 2009 and January 2010. Beginning in January 2010 to the end of the January of 2011 applications" for the program are accepted. Processing of applications and payments of benefits range from April 2010 to the end of the December 2011.

AgriInvest's application in-take dates stretches from April 2010 to the February of 2011. Producer Deposits, usually 90 days after the application is processed starts May 2010 and continues to April 2011. Government deposits, about 30 days after producer's deposits, start around July 2010 and continues May 2011.

AgriInsurance timeframe for submitting an application for insurance begins in April of 2009 and stretches to July 2009. Producers submit claims starting in June and ending in November 2009. Processing and payment, usually within 30 days of a claim, starts in October 2009 and ends in February of 2010.

AgriRecovery, assuming a Disaster has occurred in between July and November 2009, the federal – provincial assessment of the situation and design of the delivery takes place between July 2009 and February 2010. Federal and Provincial approval of agreements occur between October 2009 and August 2010, with payments to producers occurring between June 2010 and February 2011.

Advanced Payments Program begins taking applications in April 2009 until June 2009. Cash advances are provided between April 2009 and April 2010. Repayment of the advances starts in April 2010 and continues October 2010.

The last BRM program is Price Pooling Programs which starts accepting applications in April until the end of June 2009. Each producer agreement is valid for 12 months and must be renewed annually", usually April of one year to the end of March of the next year.

Duplication of Payments

In addition, the BRM program suite is designed to prevent forms of payment "stacking", where more than one payment is received for the same loss:

In conclusion, BRM Programs are designed to work in a complementary manner.

3.1.4 AgriStability and AgriInvest cover all levels of risk and there is overlap within the BRM suite of programs.

This section discusses the levels of risk covered by AgriStability and AgriInvest and the degree of overlap within the BRM suite of programs.

Risk Coverage

Interviews, consultations undertaken for the development of the successor to Growing Forward, and a recent OECD review of Canada's BRM programs emphasized that government should not cover all levels of business risk for producers. Most importantly, government should not cover the risk associated with normal, day-to-day farm management, (i.e., risks that occur relatively frequently but which should lie within the scope of any business to manage). Several industry stakeholders expressed the opinion that governments should not cover 100% of business risk. Most agreed that this created a disincentive for effective business risk management by producers. It was also seen as hindering the development and adoption of private risk management tools. Some producers questioned whether covering up to 85% through AgriStability may be considered overcompensation.

As part of the focus groups, some producers expressed the opinion that AgriStability enables them to take on more risk. For example, grains and oilseeds producers can diversify into new crops (even though new crops pose greater production risks), knowing they have the AgriStability program to assist them in years when crops do not produce a return. Conversely, other producers noted that AgriStability can also discourage diversification given that the level of coverage negates the need to adopt other producer-led and private sector risk management strategies.

AgriStability and AgriInvest are intended, together, to assist producers who suffer any degree of income loss, and cover 100% of a producer's reference margin with varying levels of compensation based on the severity of loss. Some interviewed stakeholders stated that the Tier 1 of income decline (i.e., a decline of up to 15% of the program margin relative to the reference margin) that is linked to AgriInvest would constitute a level of risk that should be covered by producers alone. It was also suggested that the current level of income decline that triggers an AgriStability payment (i.e., when the program margin falls below 85% of the reference margin) also covers some of the level of risk that should be managed by producers.

These concerns were echoed by the OECD in its review of agricultural BRM programs in Canada. The review stated that "the Canadian set of policies does not leave a clear layer of "normal" risk out of the government responsibility and, therefore, it reduces the responsibility of farmers for the management of normal farming risk" Footnote 14.

Overlap of Risk Layers

In addition to covering all layers of risk, the programs of the BRM suite overlap risk layers:

The BRM programs' interactions are illustrated in Figure 3 below.

Description of this image follows.
Description - Figure 3

Overlap in risk coverage of BRM programs

Illustration of the various BRM program overlaps of coverage during different magnitudes of loss events and timing of payments.

The figure displays the overlap of the programs by using the criteria whether the program addresses "rare and large events"; "frequent and small events"; and what is the timing for payment as measured by either Short Term –In year of loss; Medium Term (2 to 3 years); or Long Term (3 plus years).

The Advance Payment Program and Price Pooling Program do not overlap with any other program and addresses frequent and small events and falls within the Short Term time frame.

AgriInvest addresses "frequent and small events". While it does not overlap coverage with any other BRM programs, it overlaps with AAFC non-BRM programs in the long term.

The AgriInsurance has two Layers of coverage it provides in the short term: the Standard Layer handling frequency and small events and the Catastrophic Layer, addressing rare and large events.

AgriStability coverage is provided in various Tiers. These Tiers provide payments in the medium term and addresses all levels of events. Hovever, the Tiers overlap with AgriInsurance coverage. Tier 2 matches the AgriInsurance Standard layer, Tier 3 is between the Standard Layer and Catastrophic Layer and Tier 4 matches the Catastrophic Layer.

AgriRecovery overlaps AgriInsurance and AgriStability in the short to medium term for events that are considered rare and large.

Overlap is a result of the BRM programs' different payment triggers, which include declines in program margins (AgriStability), reductions in yields (AgriInsurance), and disaster events (AgriRecovery). As argued in the OECD's review of Canada's BRM programs, the overlap between the BRM programs results in a program suite that is overcrowded Footnote 15.

Complexity of Payment Calculations

The calculation of payments under the AgriStability program is extremely complex. The three tiers that make up AgriStability coverage (Tier 2, Tier 3 and Tier 4) each provide different levels of coverage to the producer based on the size of the income decline.

Adding to this complexity are the adjustments that have to be made to the calculation of producers' income margins for structural and inventory changes throughout the year (e.g. change in ownership, size of farm, increase/decrease of stocks). The calculation variables also differ by province and territory based on regional prices. Through focus groups and interviews, producers have raised concerns about the lack of transparency in how payments are calculated.

Flexibility in Managing Small Financial Risks

3.1.5 There is no direct relationship in the AgriInvest program design between monies withdrawn and income decline (Tier 1).

AgriInvest was designed to provide producers with the flexibility to use funds to protect their margins from small declines, or to provide funds for investment to reduce risks or improve profitability. Program foundational documents link AgriInvest to covering program margin declines of up to 15% relative to reference margins (Tier 1). Producers can withdraw the funds at any time for business risk management or for other reasons. Unlike the other core programs of the BRM suite, there are no triggers for payment / withdrawal.

The Alberta beef case study producer stated that AgriInvest "just fills in the cracks a little bit. It was nice, but it was not a significant amount of money to make a great difference." The funds he withdrew from AgriInvest were used to supplement the farm's cash flow.

There are no comprehensive data being collected on how AgriInvest funds are being used. There are some related data available from the BRM Survey (2010). Respondents who were AgriInvest participants who had withdrawn funds from their AgriInvest accounts were asked if they had used their AgriInvest money for specific purposes. The vast majority (90%) indicated that they had used the money to address income declines. About two-thirds (67%) indicated they used the money for other purposes, while 30% indicated they had used the funds for on-farm investments such as land, equipment or buildings. These findings were reflected in the producer focus groups, where some producers indicated that they were withdrawing AgriInvest funds to cover income declines, while others indicated that they were using the funds to address cash flow issues or to make small investments such as in equipment. While producers appreciated the program, they sometimes emphasized that the program amounts were relatively small.

Overall, producer focus group participants found AgriInvest to be easy to understand. They noted that the lack of triggers allows producers to have complete freedom in their use of the funds to address income declines, to make farm investments or to take steps to further reduce risks.

In 2008, 40% of AgriInvest participants triggering AgriStability payments did not make withdrawals from their AgriInvest account Footnote 16. This suggests that the program is not consistently being used for covering income declines within Tier 1. There is no direct relationship in the AgriInvest program design between monies withdrawn and income decline. Monies can be used to address a variety of producer needs, and there are no data on how monies are contributing to producers' business risk management.

In conclusion, AgriStability and AgriInvest operate within a crowded program environment. There is overlap within the BRM suite of programs, and there is no clear risk layer which producers are expected to manage without government support. There is an opportunity for AAFC to clarify government risk coverage, streamline the various Tiers and more appropriately share the mitigation of farm business risk between producers and taxpayers.

Recommendation #1:

AAFC should work with the provinces and territories to:

Management Response and Action Plan:

Agree. Work is underway with provinces/territories and with industry representatives to examine the risks that the agricultural industry faces and the roles that governments, private sector and individual producers could play in mitigating the impacts of risk. The Department is also informing this work through industry engagement including NPAC, national producer organizations as well as two rounds of broad industry consultations. Sessions have focused on the appropriate roles of governments, industry and producers in managing risk, as well as the intended objectives and performance of current programs in managing risk. As part of this work, government officials are examining possible adjustments to AgriStability and AgriInvest and other BRM programs that could form part of the new FPT Multilateral Framework Agreement MFA). The level and nature of risks that governments would cover and any adjustments to AgriStability and/or AgriInvest will be reflected in the MFA.

(Target: December 31, 2012 ; Responsibility: ADM SPB and ADM FFPB)

3.2 Performance - Effectiveness

3.2.1 AgriStability and AgriInvest are generally performing well in terms of coverage and participation.

The existing Performance Measurement Strategy for the BRM suite (which includes AgriStability, AgriInvest, AgriInsurance and AgriRecovery) measures success based on participation, coverage levels and the downward variability in income. Discussions regarding Growing Forward 2 have positioned BRM programs under the outcome of adaptability and sustainability (under the new Multilateral Framework Agreement for Agriculture). Program officials advise that this should lead to the development of indicators, particularly dealing with adaptability, that will be more meaningful in assessing the programs' longer term impacts on the competitiveness of the sector.

AgriStability Participation

Although not a very large percentage of Canadian producers, AgriStability participation represents a significant proportion of total Canadian farm revenues. Specifically:

Table 5: AgriStability producer participation rates, by farm type, 2008
Farm Type Estimated Producer Participation Rates*

Source: AAFC, 2011, Business Risk Management Programs - January 2011 Performance Indicators Preliminary Detailed Report, p.13.

* Participants with gross operating revenues of less than $10,000 have been excluded to allow for comparisons against Statistics Canada taxfiler information (ESAS)
**Supply-managed commodities are eligible once a producer's margin decline is greater than 30% (Tier 3).
Hogs 85%
Grains & Oilseeds 65%
Fruit, Vegetable and Potato 52%
Cattle 48%
Supply Managed** 39%
Other 27%
All 51%

In the 2010 BRM Survey, producers not participating in AgriStability most commonly selected the following reasons:

Program stakeholders also noted that many producers choose to participate in AgriStability based on their perception of the likelihood of triggering a payment.

AgriInvest Participation

The majority of farmers are participating in AgriInvest, and participants constitute a significant proportion of total allowable market sales in Canada. Specifically:

As with AgriStability, AgriInvest participation rates varied significantly by farm type. As shown in Table 6, nearly all grains and oilseed producers participated in the program in 2008 (approximately 100%). Hog farmers (75%) had the next highest rate of participation, followed by fruit, vegetable and potato (67%), cattle (66%), supply managed (56%), and other (32%) farm types.

Table 6: AgriInvest participation rates, by farm type, 2008
Farm Type Estimated Producer Participation Rates*
Source: AAFC, 2011, Business Risk Management Programs - January 2011 Performance Indicators Preliminary Detailed Report, p.47.
* Participants with gross operating revenues of less than $10,000 have been excluded to allow for comparisons against Statistics Canada taxfiler information (ESAS)
Grains & Oilseeds 100%
Hogs 75%
Fruit, Vegetable and Potato 67%
Cattle 66%
Supply Managed 56%
Other 32%
All 73%

The high participation of the grains and oilseeds sector in AgriInvest may be related to this group's previous participation in the NISA program, which existed from 1990 to 2002. NISA, which was replaced by CAIS, was heavily used by the grains and oilseeds sector as they were facing depressed prices.

In the 2010 BRM Survey, producers who had never participated in AgriInvest were asked why they had not participated. Producers most commonly stated that they had not participated because they had to make a deposit to receive a matching government contribution or because they did not have sufficient money for a deposit. In interviews, some stakeholders similarly identified financial difficulties as a barrier to participation for some producers. It was also suggested that some producers may decide not to participate in AgriInvest if they perceive the amount they are eligible to receive in a matching contribution to be low. It is possible that program awareness may also be a factor in the rate of non-participation.

In conclusion, both programs are performing well in terms of the level of coverage and participation.

3.2.2 Given the current design of the AgriStability program, the trend in increasing farm income could lead to increasing financial obligations for FPT governments over time.

Value of AgriStability Program Payments

AgriStability payments provided producers with over $3.3 billion in support during the program years of 2007 to 2010 Footnote 19. As shown in Table 7, the total value of AgriStability payments rose for each of the program years, for a total increase of 41% over the period.

Table 7: AgriStability program payments, 2007 to 2010
Program Year Total Value of Payments to Producers
($ millions)
Source: AAFC Administrative data
Note: As of January 18, 2012
2007 703
2008 749
2009 892
2010 992 (estimated)
Total 3,336

Data from Statistics Canada have demonstrated that overall Canadian farm incomes increased in three of the four most recent years examined (2007, 2008, 2010) Footnote 20. During the period, total farm cash income increased from $9.0 billion in 2007 to $11.5 billion in 2010, an increase of 28%. Farm equity has increased every year since 1987, and rose 16% between 2007 and 2010, from $252 billion to $291 billion. While payment levels are expected to ease in 2011 and 2012, increasing farm revenues are building a liability through higher reference margins. This suggests, under the current program parameters, rising producer reference levels, overall, would likely result in further increases in the total cost of AgriStability payments, should a significant number of producers experience a loss.

In conclusion, the total value of AgriStability payments per year has grown in recent years, and may continue to grow in the future given recent increases in farm income. The department, working with the provinces and territories should take action to ensure that the program remains financially sustainable over time.

Recommendation #2:

The Strategic Policy Branch should:

Management Response and Action Plan:

Agree. Analysis was undertaken to understand potential program liabilities of AgriStability in the event of a significant decrease in crop revenues. This analysis was reported to the FPT BRM Policy Working Group March 1, 2012.

The analysis demonstrates that, due to rising revenues, reference margins are increasing and a drop in commodity prices could result in significant AgriStability payments. The analysis provided a scenario whereby the Grains & Oilseed sector would face a 25% drop in revenue for the 2015 crop year, resulting in AgriStability payments more than doubling. It also concluded that, in some instances, producers could still be generating revenue while being eligible for program payments because, although they are still making a profit, their margin would be lower than their historical.

This information has been shared with Federal/Provincial/Territorial Ministers such that it can be considered in the context of the role of AgriStability and the fiscal situation faced by governments during discussions on the next agricultural policy framework (Growing Forward 2).

On an ongoing basis, SPB will continue to forecast economic trends and their impact on the AgriStability expenditures on a semi-annual basis. The results will be presented to the ADM SPB. In addition, FPT BRM Forecasting Methodology Working Group is working on a medium term (5 years) farm level income and AgriStability expenditure forecast. Overview of the medium term forecast will be provided to the FPT BRM Policy Working Group in September 2012.

(Target: September 30, 2012; Responsibility: DG, RAD)

3.2.3 There is an inherent trade-off in the AgriStability design between individualized payments for producers and payment predictability, timeliness and bankability.

The evaluation examined the design of AgriStability and its impact on payment predictability, timeliness and bankability.

Complexity of AgriStability Design

Producers and other stakeholders have repeatedly expressed the preference for income stabilization programs that tailor program payments to individual producers. This ensures that funding targets producers in need.

The core issue for AgriStability is that tailoring program payments to each producer's unique situation requires a complex calculation that is not predictable or timely relative to the period of income decline. Timing is dependent on the application submission date, the producer's fiscal year end and producer timeliness in submitting additional information requested.

Payment calculations also require significant data and data verification:

Predictability of AgriStability

Many producers, and more than a few accountants who do not specialize in farm accounting, do not understand in detail how payment amounts are calculated. In a national survey of agri-business members undertaken by the Canadian Federation of Independent Business in 2009/10, only 11% of respondents rated their understanding of the program as "high", while an additional 55% and 34% of respondents rated their understanding as "moderate" or "low", respectively Footnote 21. Accountants interviewed for the evaluation noted the program was sometimes difficult to understand for accountants who do not specialize in farm business.

Some producers in the evaluation focus groups indicated that they were not clear why government payment calculations were different from their own, and some producers did not understand why substantial income losses had not triggered a payment. In the 2010 BRM Survey, only 25% of respondents who had received an AgriStability payment indicated that the payment amount was the amount that they expected, with 56% saying it was lower and 10% saying it was higher than expected. Even accountants specializing in farm management expressed the view that they have sometimes been surprised at the results of government calculations.

The British Columbia case study poultry producer indicated that AgriStability had been unpredictable for him because the program uses provincial averages for its inventory valuations. This did not reflect the producer's own value for his inventory, which he uses for accounting purposes. For example, AgriStability administrators will use the same value for chickens regardless of their age, although younger birds are worth more as layers than older birds.

The complexity of the calculation formula is sometimes perceived as a lack of transparency. Producers in the focus groups indicated that they would like more detail on how payments are calculated, in some cases to allow them to verify government calculations. Some accountants and producers noted that they feel that the complexity has led to errors in calculation on the part of administrations. This was a perception; the evaluation did not examine evidence on this issue.

The lack of predictability in the amount of AgriStability payments undermines the "bankability". Producers noted that banks will not consider anticipated payments from AgriStability when deciding whether to lend them money.

AgriStability Timeliness

While the lack of predictability of payment amounts was the primary concern expressed by producers consulted for this evaluation, many also expressed dissatisfaction with the timing of payments. Furthermore, in the BRM Survey, less than half (45%) of producers who received an AgriStability payment said the payment arrived in a timely manner to help recover their income losses. The Office of the Auditor General in its Fall 2011 report to the House of Commons (Chapter 3, Payments to Producers) questioned whether producers understood the trade-off between a program's ability to target a specific situation and the timeliness of the payment.

The often considerable length of time between producers' income declines and their receipt of program payments means that producers frequently need to find other means to cover income losses in the short-term. Evaluation interviews and focus groups indicated that some producers are using a variety of methods, including loans or lines of credit.

Different program structures could improve the timeliness of payments. For example, a payment based on industry averages could result in payments immediately after year-end and would not require as much information from producers (e.g., inventories, accounts receivable and payable). However, using industry averages would not permit the program to address the situations that are unique to an individual farm and not reflected in the average. Through focus groups, producers continue to express a preference for the individualization of program payments because they capture unique farm situations.

In conclusion, in order to make the AgriStability program more predictable, timely and bankable, changes would be required to the way in which the program payments are calculated.

3.2.4 AgriStability payments provide effective margin stabilization over the medium-term, and producers view AgriStability as an important business risk management tool.

Margin Stabilization

Program payments are expected to mitigate the short-term impacts of large income losses. The measure used for this outcome is the difference between producers' program margins with program payments and their reference margins. The program calculates to what extent, on average, program payment amounts would return producers' incomes in their year of decline to their average income levels (i.e., their reference margins).

The evaluation found that program amounts are sufficient to provide effective margin stabilization for eligible producers who have experienced margin declines. In 2008, program margins for producers triggering a payment were raised on average from 24% to 63% of reference margins as a result of AgriStability payments, an increase of 39 percentage points.

As shown in Table 8, the difference that AgriStability payments made to producer margins, relative to their reference margins, varied by farm type. For all farm types except hogs, margins were raised to above 60% of reference margins. Hog producers' margins were raised to 41% of reference margins, the lowest level of all farm types. This was, however, affected by the unusually difficult economic factors that the hog sector was facing at that time, which had resulted in an average producer margin of -13% of reference margins, before payments. The relatively small difference made by program payments (six percentage points) shown in supply-managed recipients reflects the lower level of income variability in that sector.

Table 8: AgriStability participants' margins without and with payments, compared to the value of reference margins, by farm type, 2008
Farm Type % Without / With Payments Difference
(percentage points)
Source: AAFC, 2011, Business Risk Management Programs -January 2011 Performance Indicators
Preliminary Detailed Report, p.20.
Hogs -13% / 41% + 54
Cattle 20% / 66% + 46
Fruit, Vegetable and Potato 48% / 76% + 28
Grains & Oilseeds 49% / 74% + 25
Other 44% / 75% + 31
Supply Managed 74% / 80% + 6
Total 24% / 63% + 39

Annex D provides an illustration of the average program and reference margins of the agriculture sector, with and without CAIS/AgriStability payments, for the years 2003 to 2012 (projected).

Further simulation modeling undertaken by AAFC's RAD showed that BRM program payments reduced the year-over-year variability in margins by 26%, compared to no payments, for the period 2003 to 2009 Footnote 22. This analysis was based on calculations that assumed payments were received by producers during their year of income decline.

About one in five participating producers have triggered an AgriStability payment each program year. For the 2008 program year, 18,495 farms, or 19% of all AgriStability participants, received a program payment. In 2007, the percentage of participants was 22%, or 24,613 farms Footnote 23.

Other Benefits of AgriStability

In the case study of a Manitoba hog producer, AgriStability was felt to be critical to keeping the farm business in operation through lean years. The producer described the importance of the program in his decision-making: "In 2008 and 2009, when I had to decide if we were going to continue, I took into account what I expected to get out of AgriStability and that was what made me decide to stay in it. Without AgriStability, I would have shut down the farm."

Producers and stakeholders view AgriStability as an important risk management tool. Producers in the focus groups and case studies reported that AgriStability has helped them in a variety of ways:

In conclusion, AgriStability provides effective margin stabilization over the medium-term. Producers reported a variety of ways in which the program has been beneficial to their farm businesses.

AgriInvest Producers' Account Activity

3.2.5 Producers are actively making use of their AgriInvest accounts and are satisfied with the program.

An examination of program administrative data showed that producers are actively depositing and withdrawing from their AgriInvest accounts, as intended:

Producers in the focus groups were generally satisfied with AgriInvest. They expressed the opinion that the program design was straightforward, and they appreciated the matching government funding.

A few criticisms were expressed by some producers and stakeholders related to contribution limits; some felt that the limits were too small to allow the program to have a significant impact in addressing either business risk management or income declines. It was also noted that the program is not well-suited to help producers who are experiencing serious, longer-term financial problems, as these producers would be least able to afford to make AgriInvest deposits.

In conclusion, AgriInvest participants are making active use of their accounts based on deposits and withdrawals and are satisfied with the program overall.

Recommendation #3:

AAFC should work with the provinces and territories to:

Management Response and Action Plan:

Agree. In the short term, and in collaboration with provinces/territories, AAFC will continue to use every opportunity to raise awareness of AgriStability's objectives, timeliness/predictability and trade-offs of targeted program payments through information sessions and consultation with producer groups and NPAC. In February and March 2012, presentations that included this subject matter were made to a number of producer groups.

Upon the FPT approval of a MFA, any changes to existing BRM programs will be explained to producers via a comprehensive communication plan, which will include new messaging in program and promotional material, both in print and online, and in outreach material, public notices and earned media. Along with these explanations, FPT governments will explain to producers and Canadians the objectives, methods and procedures of each program. The publication and distribution of program materials, engagement sessions with industry and any subsequent queries by stakeholders will indicate the degree by which this recommendation is achieved. The communication plan will be developed in concert with provincial and territorial governments and will be an integral part of the role out of the new MFA. Aspects of the plan concerning cost shared programs, such as AgriStability and AgriInvest, will be approved by the FPT management committee. The degree to which this recommendation is achieved will be measured through producer and industry feedback obtained during engagement sessions and producer queries to federal/provincial delivery agencies.

(Target: April 1, 2013; Responsibility: ADM FFPB and ADM CCB)

3.2.6 The use of interim and TAP payments has been decreasing, likely due to the issue of overpayments.

Funds from AgriStability payments can be requested in advance in the form of interim payments and TAPs in order to provide timely income support following income decline. The evaluation examined producer uptake of these options, and their perceived efficacy. The issue of overpayments was also examined.

Interim Payments and Targeted Advance Payments

Where AgriStability is delivered federally, interim payments have not been widely used, and usage has declined. (No data were available for areas where AgriStability is delivered by provinces.) As shown in Table 9, the number of interim payment applications has declined significantly since 2004, from 3,992 to 176 applications.

TAPs were offered in 2007, 2008 and 2009. TAPs were available for hog farmers in 2007 and 2009, and to hog farmers and livestock farmers in 2008. There were no TAPs available in 2010. As shown in Table 9, in the years 2007 to 2009, a total of 1,611 TAPs were provided to producers.

Table 9: Use of interim payments and TAPs, where Canada delivers AgriStability, 2003-2010
Year # of Interim Payments # of TAPs
Source: AAFC administrative data
* Note that 2010 numbers do not include British Columbia and Saskatchewan, both of which began provincial delivery in that year.
2003 1,824  
2004 3,992  
2005 3,404  
2006 1,164  
2007 420 455
2008 223 770
2009 264 386
2010* 176 -

Stakeholder opinions of TAPs were mixed. Some interviewees noted that TAPs have been effective in providing needed support for sectors / geographic regions in times of need, such as hog producers in 2007. Some stakeholders indicated that there should be consistent criteria for triggering TAPs, as leaving it to governments' discretion may disadvantage producers in provinces deciding not to use TAPs.

A TAP or interim payment provides a producer with an advance up to an amount determined based on a regional average of expected income declines, or up to 50% of their estimated final payment, respectively. The calculations for interims or TAPS are made at the time the application is made based on current product prices and inventory levels. These factors could change during the course of the year, thereby affecting the final payment. Should the value of product prices and inventories increase by the end of the year, the producer could experience an overpayment. The potential for overpayments adds to the complexity of AgriStability's program design.

Overpayments

Frequent overpayments were widely seen as a factor that was limiting the use of interim payments and TAPs. Producers and other stakeholders noted that overpayments have been so common that some producers are refusing to consider interim payments, and some accountants are not recommending them for the same reason. (Alternatively, one accountant said he told producers to view interim payments as "interest-free loans".) Repayments of the overpayments (i.e., "clawbacks") were noted to be an irritant for producers.

Table 10: AgriStability overpayments, 2007 to 2009
Year 2007 2008 2009
(as of Sept 2011)
Overpayments of... $ millions # of Participants $ millions # of Participants $ millions # of Participants
Source: FIPD weekly updates. Numbers may not add due to rounding.
Interims 4.6 259 2.1 86 4.3 81
TAPs 25.4 269 12.5 484 26.9 168
Final Payments 13.5 937 6.6 493 1.0 94
Total 43.6 1,465 21.1 1,063 32.2 343

In fact, for the years 2007 to 2009 (as of September 2011) there were 483 overpayments of interim payments and 864 TAP overpayments. This represented 53% of the number of interim payments and 54% of the TAPs for these years.

The BC poultry case study producer stated that he does not use interim payments because he does not want to be in an overpayment situation. He said that in the event of an income loss, he has sufficient credit and income from other farm operations to rely on in the short term. For one of his farm operations, the producer had to repay $100,000 as a result of an overpayment for a final AgriStability payment.

The large number of overpayments of interim payments and TAPs is a consequence of the nature of these payments. In order for payments to be timely, payments are based on estimates of AgriStability final payments using early or incomplete information. Changes throughout the year to commodity prices or to farm businesses can change a producer's eligibility for a final AgriStability payment or the amount they will receive.

Concerns were raised by stakeholders and producers over the length of time that AAFC or a province can re-assess a final AgriStability application and make adjustments that can result in a portion or all of the payment being clawed back. Accountants noted that, except in cases of fraud, there should be a statute of limitations on AgriStability clawbacks similar to that outlined in the Income Tax Act: three years.

In conclusion, interim payments and TAPs have been available to provide eligible producers with timely access to a portion of their AgriStability payments. However, the nature of interim payments and TAPs has meant more complexity. Overpayments are very common and have been a disincentive to the usage of these options. In addition, a concern was identified with respect to the period of time during which payments can be re-assessed.

Recommendation #4:

AAFC should work with the provinces and territories to:

Management Response and Action Plan:

Agree. This proposal is included in ongoing discussions at the FPT BRM Policy Working Group along with other proposals for program change. However, the multi-year nature of reference margins and other program requirements, such as CRA and provincial laws, rules and regulations will influence the adoption of this recommendation. The FPT Administrators Working Group is reviewing account receivables and other factors that can influence historical assessments and will be making a recommendation on this matter to FPT ADM's for approval.

(Target: April 1, 2013; Responsibility: DG, BRMPDD)

Interaction of BRM Programs and Impact on Producer Behaviour

3.2.7 There is a lack of integrated micro (participant-level) data to assess the interaction of BRM programs at the producer level.

AgriStability was designed to avoid masking market signals and altering how producers respond to the need for industry adjustment based on changing market conditions. There are currently no integrated longitudinal micro-data (including revenues, expenses, inventory, assets and liabilities) that would allow an empirical examination of whether AgriStability is altering producer behaviour in unintended ways, such as through encouraging risk-taking or masking market signals. Furthermore, data do not allow for a complete understanding of how the different BRM programs are interacting at the individual producer level. As a result, findings on the impact of the program on producer decision-making rely on producer/stakeholder opinion and simulation modeling.

There was no consensus among producers or stakeholders as to whether AgriStability was encouraging producer risk-taking. Some felt that AgriStability enabled producers to take on more risk, or reduced the need for producers to develop other business risk management approaches, such as diversification. Others said the program did not influence how producers are farming, noting that the program would have to be more predictable to have a strong effect on producer decision-making.

Some financial representatives noted that the information requirements involved in participating in AgriStability have encouraged some producers to improve their business management, including through promoting the use of accrual accounting. Compared with cash accounting, accrual accounting provides benefits to the enterprise in terms of planning and managing resources and requirements.

Simulation modeling was undertaken by RAD to examine the issue of capitalization of government program payments. The analysis (which included all government payments, not just AgriStability and AgriInvest) found that government program payments had a positive impact on the probability of capital investments. However, it is unlikely that producers will invest during period of income loss, such as when they are receiving AgriStability payments.

In conclusion, an integrated, longitudinal micro-database of all BRM participants would help to further examine whether the program has resulted in any unintended impacts and how BRM programs are interacting at the producer level.

Recommendation #5:

AAFC should work with the provinces and territories to:

Management Response and Action Plan:

Agree. The Department will work with the provinces to increase the data available for policy analysis on the impact of BRM programs, including investigating the feasibility of developing a micro level data base that would allow for a better understanding of the interactions of programs. Discussions with the administrations will be held in the summer of 2012 on the data required and technical aspects of the transfer. The intent of these discussions would be to strengthen the commitment to improve analytical capacity in the MFA and a recommendation on developing an integrated database by April 2013.

(Target: April 2013; Responsibility: DG, BRMPDD)

3.3 Performance - Efficiency and Economy

3.3.1 The devolution of AgriStability has resulted in a loss of economies of scale in terms of AAFC program delivery.

The administration of both AgriStability and AgriInvest was in a state of transition during the period examined for this evaluation due to the devolution of the AgriStability program. The Program's devolution began at the request of the provinces who wished to deliver AgriStability in conjunction with AgriInsurance to obtain operational efficiencies. Prince Edward Island, Quebec, Ontario, and Alberta were the first provinces to begin to deliver the program beginning in 2007. In January 2010, the delivery of AgriStability was devolved to British Columbia and Saskatchewan. That same calendar year the responsibility for holding producers' AgriInvest accounts was transferred from Footnote 26.

The changes in delivery for both programs required the implementation of new data systems, and significant changes to staffing. The administrative costs of the programs demonstrated in the evaluation data reflect this unique period of program transition.

AgriStability Administrative Costs

Table 11 shows the calculated cost per AgriStability application, and administrative costs as a percentage of total program costs, for where AgriStability is delivered by AAFC. The increase in costs reflects the loss of the economies of scale in processing applications with the devolution of the program.

Table 11: AgriStability administrative costs, where Canada delivers, 2007/08 to 2010/11
Fiscal Year Cost per Application
$
Administrative Costs
as a % of Total Costs
Source: AAFC administrative data
2007/08 1,012 (CAIS) 8%
2008/09 1,140 17%
2009/10 1,090 16%
2010/11 1,976 12%

The differences across the years are at least partly a result of the fact that AgriStability is a demand-driven program, and administrative costs will fluctuate by year due to changing market conditions and application numbers. According to the program, the cost per file for AAFC delivery is expected to stabilize at about $1,750 per file, an increase of $660 or 61% per file from 2009/10.

According to a recent study of AgriStability administrative costs by Meyers Norris Penny, the transition to provincial delivery in British Columbia and Saskatchewan has resulted in a loss of economies of scale for AAFC and the provinces. Producers in British Columbia and Saskatchewan accounted for approximately 70% of the program applications processed by AAFC prior to 2010 Footnote 27.

The Meyers Norris Penny report identified three options available for the remaining four provinces and one territory for which AAFC delivers the AgriStability program (i.e., Manitoba, New Brunswick, Nova Scotia, and Newfoundland and Labrador, and Yukon). The report's options included:

In conclusion, the devolution of the AgriStability program to British Columbia and Saskatchewan has resulted in a loss of economies of scale in terms of AAFC program delivery. Federal, Provincial and Territorial governments should assess whether more cost-efficient options can be found for the delivery of AgriStability where Canada currently delivers.

Recommendation #6:

AAFC should work with the provinces and territories to:

Management Response and Action Plan:

Agree. In collaboration with the provinces and territory where Canada delivers the AgriStability program, AAFC will complete an assessment of cost-effective delivery model alternatives and report its assessment to the ADM FFPB and her provincial/territorial counterparts.

(Target: March 31, 2013; Responsibility: DG, FIPD)

AgriInvest Administrative Costs

Table 12 shows the calculated cost per AgriInvest application, as well as administrative costs as a percentage of total AgriInvest program costs. Administrative costs incurred in 2007/08 were primarily related to planning and program set-up. The significant increase in administrative costs in 2009/10 was the result of changes to the delivery including transfer of the responsibility for holding producer accounts from AAFC to financial institutions for the 2009 program year.

Table 12: AgriInvest administrative costs, where Canada delivers, 2007/08 to 2009/10
Fiscal Year Cost per Application
$
Administrative Costs
as a % of Total Costs
Source for cost per application: AAFC administrative data and AAFC, 2011, Business Risk Management Programs - January 2011 Performance Indicators Preliminary Detailed Report, p. 64.
Source for administrative costs as a % of total costs: AAFC administrative data
2007/08 - 1%
2008/09 32 3%
2009/10 110 6%
2010/11 117 5%

Administration costs for the AgriInvest program appear to be stabilizing. However, AAFC should continue to monitor these costs.

3.3.2 AgriStability and AgriInvest are not meeting their processing service standards.

Application processing times have consistently been below service standard targets for both AgriStability and AgriInvest. Table 13 shows that the percentage of completed applications processed within 75 days varied from 10% in 2009 to 65% and 67% in 2008 and 2010, respectively. The target of 75% of applications processed within 75 was not met in any of the three years.

Table 13: AgriStability application processing times compared to service standard, where Canada delivers, 2008-2010
Year % of Completed Applications within 75 days
Target = 75%
Source: AAFC administrative data
2008 65%
2009 10%
2010 67% (forecast)

AgriStability processing time was affected by the implementation of new data business systems and the data transition from the old to the new system, particularly during 2009. Program officials noted that the performance has improved for 2010, while at the same time catching up on the 2009 shortfall. As a result, they indicated that prospects are looking positive for 2011 processing.

AgriInvest application processing times were also consistently below service standards. As shown in Table 14, the percentage of completed applications processed within 45 days varied between 37% and 44% across the 2008 to 2010 program years, significantly below the target of 80%.

Table 14: AgriInvest application processing times compared to service standards, where Canada delivers, 2008-2010
Year % of Completed Applications within 45 days
Target = 80%
Source: AAFC administrative data
2008 37%
2009 44%
2010 37%

AgriInvest program officials cited a postal strike in 2011 as a factor that influenced service standard achievement for 2010 processing times. According to the program, while processing times were within 45 days for over 70% of AgriInvest applications, Canada Post delays in issuing Deposit Notices prevented many files from actually meeting the service standard. The postal strike and internal system readiness both contributed to this situation.

AAFC program officials maintain that the processing service standards for both AgriStability and AgriInvest can be achieved for the 2011 program year, as the new data system is operational, staff are in place, and a readiness process has been developed for 2011 applications.

In conclusion, application processing times for both programs have consistently been below program service standard targets, but AAFC program officials have indicated that service standards can be achieved for the 2011 program year.

Recommendation #7:

The Farm Financial Program Branch should:

Management Response and Action Plan:

(Target: March 31, 2013; Responsibility DG, FIPD)

4.0 Conclusions and Recommendations

4.1 Conclusions

Government support for the agricultural sector has been important in helping producers manage business risk and income variability. The agriculture sector faces a wide range of risks that result in significant income variability. Income variability and risk affect producers' well-being, and production and investment decisions. Government BRM tools have complemented other available producer-led and private sector options to provide stability in the sector in order to maintain production levels.

AgriStability and AgriInvest are aligned with the historic federal role of supporting the agricultural sector, and with the Growing Forward policy framework and AAFC strategic outcomes. Federal policies directed at farm income stabilization in Canada date back to the Agriculture Stabilization Act of 1958. Stakeholders widely believe that while producers have the ultimate responsibility for managing their business risk, government also has important roles, including assisting producers with large and unpredictable losses, and supporting a level competitive playing field for producers.

BRM programs are designed to work in complementary manner. The BRM programs are designed to eliminate "stacking" amongst the programs and work in complementary ways, reflecting the different triggers and timing of program funding.

AgriStability and AgriInvest cover all levels of risk and there is overlap within the BRM suite of programs. Canadian BRM programs cover all levels of risk, including those considered lower level risks (i.e., risks that occur relatively frequently but which should lie within the scope of any business to manage). Together, AgriStability and AgriInvest cover 100% of a producer's reference margin. AgriStability overlaps coverage with both AgriInsurance and AgriRecovery. The existing level of coverage may crowd out the development of producer-led or private sector initiatives that could complement the current government BRM tools.

There is no direct relationship in the AgriInvest program design between monies withdrawn and income decline (Tier 1). AgriInvest was designed to provide producers with the flexibility to use funds to protect their margins from small declines or to provide funds for investment to reduce risks or improve profitability. However, there is no comprehensive data on how AgriInvest funds are being used, and producers can withdraw funds at any time.

AgriStability and AgriInvest are generally performing well in terms of coverage and participation. Although not a large percentage of producers (51% of all eligible producers), AgriStability participation represented 68% of total Canadian farm revenues (based on the 2008 program year). AgriInvest participation represents 71% of total allowable market sales in Canada.

The total value of AgriStability payments per year has grown in recent years, and may continue to grow in the future given recent increases in farm income. The department should work with the provinces and territories to take action to ensure that the program remains financially sustainable over time.

There is an inherent trade-off in the design of the AgriStability program between individualization of payments to producers and payment predictability, timeliness and bankability. In order to make the AgriStability program more predictable, timely and bankable, changes would be required to the way in which program payments are calculated.

AgriStability payments provide effective margin stabilization over the medium-term, and producers view AgriStability as an important business risk management tool. Evidence shows that AgriStability does have a stabilization effect on producer reference margins over the medium-term. Producers also commented on the fact that AgriStability has helped them in a variety of ways, for example in making payments on inputs and operating loans, and reducing the amount of debt they incur.

Producers are actively making use of their AgriInvest accounts and are satisfied with the program. Almost $304 million in producer deposits were made in 2009, which represented 87% of the maximum contributions that could have been made by participating producers in that year. Twenty-three percent (23%) of participants withdrew some or all of the funds in their AgriInvest accounts in 2008. Producers are satisfied with the program overall.

The use of interim and TAP payments has been decreasing, likely due to the issue of overpayments. Overpayments have been so common that some producers are refusing to consider interim payments and TAPs as options in managing short-term income variations. Concerns were also cited over the length of time that AAFC or a province can re-assess a final application and make adjustments that can result in an overpayment.

There is a lack of integrated micro (participant-level) data to assess the interaction of BRM programs at the producer level. An integrated, longitudinal micro-database of all BRM participants (containing revenues, expenses, inventory, assets and liabilities) would allow an empirical examination of how BRM programs interact at the producer level and of the programs' impact on producer behaviour.

The devolution of AgriStability to British Columbia and Saskatchewan has resulted in a loss of economies of scale in terms of AAFC program delivery. Federal, provincial and territorial governments should examine whether there are more cost-efficient ways to deliver the AgriStability program in the remaining jurisdictions where Canada currently delivers.

AgriStability and AgriInvest are not meeting their processing service standards. Program officials cited a number of internal and external factors that have negatively affected application processing times; including the implementation of new data business systems, but believe that application processing service standards for both programs can be reached by the 2011 program year.

4.2 Recommendations

The evaluation identifies the following seven recommendations:

Recommendation #1:

AAFC should work with the provinces and territories to:

Recommendation #2:

The Strategic Policy Branch should:

Recommendation #3:

AAFC should work with the provinces and territories to:

Recommendation #4:

AAFC should work with the provinces and territories to:

Recommendation #5:

AAFC should work with the provinces and territories to:

Recommendation #6:

AAFC should work with the provinces and territories to:

Recommendation #7:

The Farm Financial Programs Branch should:

Annex A: Differences between AgriStability and the Canadian Agricultural Income Stabilization (CAIS) Program


Program Change 2003 CAIS AgriStability Expected Benefit to Producers
Source: Adapted from AAFC Fact Sheet
Inventory valuation End of year price used to value inventory. Both opening and end of year prices used to value inventory. More accurate assessment of losses.
Negative margin coverage expanded Producers with negative reference margins not eligible. Limit on number of negative margin payments a producer could receive. Producers with negative reference margins eligible. No limit on number of negative margin payments. Better protection for those faced with back-to-back disasters.
Easier participation requirements Producers had to make a deposit equal to 22% of their reference margin. Producers pay $4.50 per $1,000 of reference margin protected. Cash is not tied up in deposit.
Targeted advances available Target advances not available. Targeted Advance Payment in place to provide assistance in times of serious income declines. Faster payments in times of serious income declines.
Easier sign-up Producers had to select and mail in level of protection annually. Automatic sign up for producers who participated previously. Simpler sign up process.
Deadline flexibility Missed deadline meant producers were ineligible. Late filing provisions with penalties now in place. More flexibility in meeting program requirements.
Online calculators No way to accurately estimate payments More accurate online calculators available in most provinces. Tools to estimate payments more accurately.
Shorter form Six page application. In federal delivery provinces, a one-page form is included in the Canada Revenue Agency harmonized form. Shorter forms.
Electronic filing Information could not be submitted electronically. Secure e-filing is available in most provinces. Faster, more efficient filing.
Clearer program statements Program statements arrived long after payments and did not include all calculations Program statements are more informative and arrive sooner. More detailed information on how benefits are calculated.

Annex B: Further Detail on AgriStability and AgriInvest Design and Delivery

AgriStability

The maximum AgriStability payment for a producer in any given year is the lesser of $3 million or 66.5% of the margin decline in Tiers 2 and 3 in the program year margin.

In each program year, participating producers receive enrolment notices containing the information required to pay the program fee, including the deadline for payment. The fee is currently calculated at a rate of $3.825 for every $1,000 of the producer's protected reference margin. Producers are also charged an annual Administrative Cost Share amount of $55.

Producers of supply-managed commodities are eligible under AgriStability, but only once a producer's margin declines into Tier 3. This recognizes the fact that supply management is, in itself, a form of risk management.

AgriInvest

AgriInvest accounts are split into two components: Fund 1 holds producer deposits, and Fund 2 holds matching government contributions. Any withdrawals by producers are drawn from Fund 2 first, unless it is empty. Interest paid on the balance in a producer's account is credited to Fund 2. Accounts have maximum balance limits of 25% of a participant's ANS for the current year and the preceding two years. Producers can withdraw funds from their account at any time, notwithstanding the tax implications.

In order to make a program payment, participants submit a program year application and receive a Deposit Notice outlining their maximum deposit eligible for a matching government contribution. Producers have 90 days from the issue date on the Deposit Notice to make a deposit to their account.

Supply-managed commodities are not allowable commodities under AgriInvest. Producers of supply-managed commodities who also produce allowable commodities may be eligible for AgriInvest based on the non-supply-managed portion of their farming operation.

Please see the following figure, which illustrates the intended share of farm margin declines borne by producers and governments, respectively, through AgriStability and AgriInvest.

Description of this image follows.
Description - Annex B

Producer share / Government Share.

This figure illustrates the intended share of farm margin declines borne by producers and governments, through AgriStabitily and AgriInvest.

AgriStability is made up of three Tiers.

Tier 1 represents producers' margins declines between 100 and 85%, which is covered by AgriInvest. Producers and government share equally at 50 - 50.

Tier 2, is the first Tier of AgriStability. It represents a margin decline between 85% to 70% of the producer's margin where producers share is 30% and government share is 70%.

Tier 3 is represents a margin decline between 70% and 0%. The Producers share is 20% and the governments share is 80%.

The fourth Tier or "Negative Tier" occurs when the producers margin fall in a negative position. The producer-government share is 40%-60%.

Annex C: Government BRM Programs in Canada


  BC AB SK MAN ONT QC NS NFLD NB PEI YK NWT NUN
P denotes Provincially delivered program
F denotes Federally delivered program
BRM AgriStability P P P F P P F F F P F    
AgriInvest F F F F F P F F F F F    
AgriInsurance P P P P P P P P P P      
AgriRecovery (2010 Initiatives) P P P P P P     P P      
Other FPT Wildlife Damage Compensation (GF program) P P P       P   P   P    
OVTP         P   P   P        
Plum Pox Eradication         P                
Provincial
Programs
Alt Farm Loan Program (AB)   Yes                      
Cattle Price Insurance program (AB)   Yes                      
Livestock Loan Guarantee (LLG) (SK)     Yes                    
SK Feed and Forage Program     Yes                    
MASC Insurance (MB)       Yes                  
Risk Management Program (RMP) ( ON)         Yes                
Grain Financial Protection Program (ON)         Yes                
Commodity Loan Program (CLP) (ON)         Yes                
Ontario Beef Breeder Loan Program (ON)         Yes                
Ontario Feeder Cattle Loan Guarantee Program (ON)         Yes                
Agri-Quebec (QC)           Yes              
Farm Income Stabilization Insurance (ASRA) (QC)           Yes              
Honeycrisp Orchard Renewal (NS)             Yes            
Beef Interest Pay-Down Program (NS)             Yes            
Livestock Incentive Loan Program (NB)                 Yes        
Business Development Program (NB)                 Yes        
Perennail Crop Establishment Loan Program (NB)                 Yes        
New Entrant Farmer Loan Program (NB)                 Yes        
Loan Guarantees - Agriculture (NB)                 Yes        
Agriculture Direct Loans (NB)                 Yes        
Federal
Programs
Advance Payments Program (APP)                          
Price Pooling Program                          
Canadian Agricultural Loans Act (CALA) Available to producers across Canada through various producer organizations or lending institutions (no participation from provincial governments).

Annex D: CAIS/AgriStability Program Margin Protection

The following figure shows program margins and reference margins for the years 2003 to 2012 (forecasted).

In this figure, Tiers 1 to 4 are represented, as well as:

Description of this image follows.
Description - Annex D

CAIS/AgriStability

Base Model: Total for all sectors

This figure shows the program margins and reference margins for the years 2003 to 2012 for producers who received a payment and for those who did not.

The average payments received through the various tiers has maintained a fairly stable upward trend fluctuating from just over $60,000 in 2003 to just under $80,000 in 2012.

Tier 3 had the largest area under the aggregated payment line followed by Tier 2.

The average reference margin for those not receiving a payment and those receiving a payment showed increasing trends for both groups. The producers who did not receive payments had higher reference margins in 2012 at $120,000 compared to those who received payments at $100,000 in 2012.

Source: AAFC Program Administration and AAFC Forecast

Annex E: Bibliography

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